Wednesday, September 18, 2024
Hood County Commissioners Court took a decisive stand Tuesday, Aug. 27 by disapproving the Hood Central Appraisal District’s proposed 2025 budget.
The court’s action, supported by a 3-2 vote, not only mandates a budget revision but also calls for a comprehensive forensic audit of the appraisal district’s financial records dating back to 2017.
THE COURT’S TASK AND SOME HISTORY
The court was tasked with deciding whether to adopt a resolution disapproving the proposed 2025 budget for the HCAD, request excess surplus and reserve funds be returned to the taxing entities, and refund monies paid for unapproved ventures that may be identified in a forensic audit of the prior five years of HCAD expenditures.
During the meeting, Hood Central Appraisal District Chief Appraiser Jeff Law presented the proposed 2025 budget to the commissioners, emphasizing the importance of its approval despite ongoing concerns about the district’s financial management.
Law acknowledged a resolution passed by the commission in May 2024, which requested the 2025 budget include provisions for a forensic audit.
Similar resolutions were passed by the City of Granbury, the City of Tolar and other local entities. However, Granbury ISD later suspended its resolution over cost concerns, and Lipan ISD chose to refrain from taking any action.
Law informed the court that HCAD’s board of directors met Aug. 1 to discuss the potential audit, considering input from the various taxing units involved. He explained that while three units supported the audit, two opposed it, and six abstained from taking any official action.
IN DEFENSE OF THE BUDGET
“Your disapproving of this budget won’t resolve any of those issues that happened in the past,” Law stated. “The appraisal district needs these funds going forward to accomplish our statutorily required duties.”
Addressing the appraisal district’s financial state, Law noted that HCAD returned $1.908 million to the taxing entities shortly before he assumed office in September 2023.
The district’s current fund balance is $426,000, with $110,000 designated for litigation, building repairs and technology. This leaves an undesignated balance of $316,000, or about 1.2 months’ worth of reserves.
Law recommended the board adopt a policy to maintain two months of reserves, which would require approximately $550,000.
In response to concerns about how HCAD manages unspent revenue, Law clarified that the district has consistently operated within its approved budget, often ending the fiscal year with either a surplus or a need to draw from reserves based on expenditures versus revenue.
“More than 75% of our budget is allocated to salaries and employee-related expenses,” he explained, adding that any budget surplus is typically the result of unfilled vacancies, which lead to unspent salary funds.
Law also touched on past decisions to allocate surplus funds toward reducing unfunded liabilities in the Texas County and District Retirement System, a strategy in place since 2016. Additionally, surplus funds had been earmarked for potential new building projects, though those plans were ultimately scrapped, and the money was refunded to the taxing entities.
ON REVERSING A PREVIOUS HCAD ACTION
Law mentioned he had explored the possibility of retrieving funds already deposited into the TCDRS trust fund but was informed that statutory requirements prohibit such a move. He is still awaiting confirmation of this statute.
Reiterating the district’s financial standing, Law said the current $316,000 fund balance provides roughly two months of operating reserves. He acknowledged an earlier comment that some county entities have occasionally delayed their payments to the district, though these payments were eventually received. Based on his experience in other districts, Law remarked that it is not uncommon for large entities to delay payments by a few months.
Law addressed inquiries regarding the timeliness of payments from major contributors, specifically the Granbury Independent School District, which contributes 62% of the appraisal district’s revenue. Law confirmed that, to his knowledge, the Granbury School District had never been late with payments.
“Have we ever been late?” asked Precinct 2 Commissioner Nannette Samuelson.
“Yes, ma’am. Last year,” Law replied. He explained that a law in the tax code automatically imposes penalties on late payments, but the HCAD board has the authority to waive those penalties.
“Hood County’s tardiness was addressed by waiving the penalty, and the delay was attributed to the prior auditor rather than the transition to a new auditor,” Law clarified.
As the meeting progressed, it became evident that the decision before the Commissioners’ Court concerned not only the 2025 budget but also restoring confidence in the Hood Central Appraisal District’s financial practices.
HCAD’S SPENDING SPREE’ AND ‘FAT BUDGET’
The conversation then shifted to the potential costs of a forensic audit, which is a matter of concern for Granbury ISD due to its significant financial contribution to the appraisal district.
In response to Judge Ron Massingill’s question regarding Granbury ISD’s disapproval of the audit, Law clarified that if the forensic audit were included in the district’s budget, Granbury ISD would be required to cover 63% of the cost, despite its disapproval of the audit.
Law also explained the difference between the standard financial audit, which was completed and presented last month, and the proposed forensic audit, which has yet to be conducted.
During his presentation, Mayor Jim Jarratt, a speaker at the meeting, raised concerns about the budget. He pointed out that at a recent Granbury City Council meeting, a decision was made to disapprove the HCAD’s budget, reduce it by $500,000, and request a forensic audit.
Jarratt argued the budget is excessively large, noting that between 2016 and 2021, $1.8 million beyond the actuarial requirement was added to the retirement fund without sufficient oversight from contributing entities.
“This additional funding was done without sufficient oversight or awareness from the entities contributing to the district, effectively placing the financial burden on the citizens,” Jarratt stated.
Jarratt continued his critique by highlighting what he described as a pattern of excessive spending within the HCAD. He noted that between 2021 and 2023, more than $2 million in excess funds were available, with $1.9 million being returned to the entities involved.
He questioned the whereabouts of an additional $100,000 and mentioned that another $293,000 was expected to be returned in 2023 or 2024. According to Jarratt, this pattern indicated over-budgeting and mismanagement.
He also raised concerns about recent expenses, mentioning that in December 2023, the district approved more than $200,000 for architectural services. Over the last three years, $387,000 has been spent on architectural services without clear approval for building construction.
Both Jarratt and Law agreed there was no authorization to proceed with building plans.
PRAISE FOR LAW AND NEED FOR FORENSIC AUDIT
The discussion then turned to the performance and governance of the HCAD. Jarratt referenced evaluations by the Texas Comptroller of Public Accounts, contrasting the district’s 2021 budget, which met all required standards, with the 2022-2023 preliminary assessment, which highlighted significant deficiencies in governance, taxpayer assistance, and operating procedures.
“The Appraisal District has been more than forthcoming on providing information and working with the conversation,” Jarratt said, adding “what it comes down to me is that this is a fat budget.”
“I have confidence in Mr. Law’s ability to correct these issues, given his history of high performance,” Jarratt said.
Jarratt also emphasized the need for a forensic audit, suggesting that it should cover a more extended period, potentially going back to 2016, to fully understand the financial decisions that led to the current situation.
He expressed concern about the lack of clarity regarding the cost of such an audit, noting that estimates varied widely — from $10,000 to $100,000 — depending on the scope. Jarratt inquired whether the HCAD has issued a Request for Proposal (RFP) to obtain a specific scope and cost for the audit.
Law responded that no RFP or quotes have been obtained at this time, leaving the potential cost of the audit uncertain.
AUDIT DISCUSSION BEGAN IN MAY 2024, BUT NO RESEARCH INTO COST
Resolutions passed by the City of Granbury and Hood County in favor of conducting a forensic audit occurred in late April or early May 2024.
Despite these resolutions, no formal investigation into the potential cost of the forensic audit has been initiated, and the scope of the audit, initially proposed to cover five years, is now being considered for expansion back to 2016, potentially increasing the cost significantly.
HCAD STAFF EFFICIENCY QUESTIONS
The final segment of the Hood Central Appraisal District budget meeting centered on the proposed 2025 budget, which includes high salaries for key positions and raises questions about the district’s overhead costs and transparency practices.
Discussion began with a detailed breakdown of the salaries for top positions within HCAD. The chief appraiser earns $198,000, including an $8,000 car allowance. A new deputy chief appraiser position is proposed with a salary of $130,000, also including a car allowance.
The appraisal manager earns $109,000 with a $9,600 car allowance. These positions alone account for $437,000 in salaries, not including benefits or the district’s 12% contribution to the Texas County and District Retirement System.
Concerns were raised about whether such overhead is necessary for managing a team of just eight appraisers. The discussion also highlighted the office manager/executive assistant role, with an annual salary of $117,000, including an $8,000 car allowance.
FURTHER TRANSPARENCY
The discussion then shifted to improved transparency and accessibility under Law’s leadership, with suggestions to further enhance transparency by recording or live-streaming HCAD meetings.
Questions about the district’s recourse if audits reveal discrepancies or misappropriations were raised.
The possibility of filing an errors and omissions claim with the insurance company was discussed, particularly concerning the $387,000 spent on surveys of questionable properties.
The return of $1.19 million and identification of $1.8 million in excess funds were noted, signaling potential recoveries from past financial mismanagement.
The discussion turned critical as commissioners scrutinized HCAD’s practice of over-budgeting and retaining excess funds, which totaled $2.8 million over five years.
Frustrations were expressed over HCAD’s resistance to external audits, with commissioners emphasizing the need for transparency and accountability, especially since HCAD’s board members are not elected officials.
THE MOTION
The session concluded with a vote on a resolution to disapprove the proposed 2025 HCAD budget. Samuelson made a motion to adopt the resolution to disapprove the proposed budget from the HCAD, to request excess surplus and reserve funds be returned to the taxing entities, and to refund monies paid for unapproved ventures that may be identified in a forensic audit of the prior five years of HCAD expenditures. The motion was seconded by Precinct 4 Commissioner Dave Eagle, and the resolution passed with three votes in favor and two opposed — Massingill and Precinct 3 Commissioner Jack Wilson.
